Google acquires Motorola Mobility for $12.5 billion

15 August 2011 | Kavit Majithia

The world’s largest internet company, Google, has announced today it will acquire Motorola Mobility for $12.5 billion.

The companies said both shareholders have approved the deal and it is expected to be completed by 2012 at the latest. Google has been actively seeking ways to enter into the telecoms market, and the acquisition could prove very significant in achieving that goal.

The deal means Google will have access to the Android operating system, which Motorola Mobility serves as the handset producer. A joint release said the deal will enable Google to supercharge the Android system, and many market watchers expect there will be increased competition between Android and Apple as a result of Googles influence.

Motorola Mobilitys total commitment to Android has created a natural fit for our two companies, said Larry Page, CEO at Google. Together, we will create amazing user experiences that supercharge the entire Android ecosystem for the benefit of consumers, partners and developers. I look forward to welcoming Motorolans to our family of Googlers.

Motorola, a distinguished handset producer for many years, split its consumer business and mission critical business earlier this year. It has also recently struggled to compete with Apple, Samsung and HTC in the handset market, but this landmark deal will break new ground for the Android ecosystem, said Andy Rubin, SVP of Mobile at Google. Our vision for Android is unchanged and Google remains firmly committed to Android as an open platform and a vibrant open source community, he said. We will continue to work with all our valued Android partners to develop and distribute innovative Android-powered devices.

Ovum analyst Nick Dillon believes the key objective of the acquisition for Google is the access it gains to Motorolas patent portfolio and also the resulting increase in access to IP. Having been outbid in the recent sell-off of Nortels patent portfolio, Google was clearly looking elsewhere to build up its arsenal of IP, he said.

A result of the deal means Google will now become a hardware vendor, and Dillon questions how other Android vendors will react to the fact Google has moved from being a partner, to a competitor within the Android ecosystem. If, for example, Google provides preferential access to the Android code to its own hardware division, this would place other vendors at a disadvantage and may lead them to question their commitment to the platform, potentially pushing some towards other platforms.

Capacity will be reporting throughout the week on any market reaction to this ground-breaking deal.